What is Going On in Greece?

[nathanm]

Nathan, what's problematic to me is risking our debt rating and our ever-increasing interest expense.  Think how many disadvantaged Americans could receive a completely paid college education, or how many people could receive a seed grant to start a business which would employ other Americans in lieu of paying interest on our debt to foreign debt holders which only helps bolster their economy.

I'm glad to see most of us are trying to get beyond pointing a finger at who is at fault and actually looking at solutions.  Positive dialogue like that on a national scale might restore some semblance of sanity to our political landscape and we might actually start working on the same goals and learning compromise doesn't mean one side or the other has lost.  Yeah, I know, I'm dreaming again.  

Luckily, from your perspective, about half of the public debt (this doesn't count the amounts owed to the Social Security Trust Fund, for example) is owned by US persons/entities. I'd rather we not have overspent through the good years, but Bush was elected along with a bunch of borrow and spend Republicans and here we are.

Regarding the interest expense on the debt, I agree that I'd rather be spending that productively. But again, we foobared up and borrowed through the good years, so here we are. On the bright side, it's cheap for the federal government to borrow right now, so we actually had less interest expense last year than we did in 2007. I'm trying to find a breakdown as to how much of that is flowing out of our economy into foreign hands, how much is the government paying itself and how much is being paid to US persons, but it's proving difficult.

As far as Keynes goes, the $350 billion we spent on that was a drop in the bucket to the supply side tax cut BS and even that was a drop in the bucket compared to the bailouts which we may or may not be on the hook for in the end (that's a large part of the increase in our debt, actually)

[Conan71]

Your numbers are incorrect.

According to http://www.recovery.gov/Pages/default.aspx

Thus far $653B has been spent under the ARRA of 2009 which includes tax benefits (yes, this would be a real figure according to the logic that tax cuts are an expense), grants, loans, and contracts, and entitlements.

I'd like to be excited about our interest expense being less than that in 2007, but it's sort of like the excitement one feels when waking up from a near fatal wreck only to find out you are paralyzed from the neck down.

[nathanm]

Tax cuts are not Keynesian stimulus, sorry.

[Conan71]

Tax cuts are not Keynesian stimulus, sorry.

Someone forgot to tell John Maynard Keynes that.  Both President Bush with his $170 billion stimulus in 2008 and President Obama's proposed stimulus of $785 billion comes to $955 billion.  Might as well call it a trillion.  Considering actual expenditures, the total between Bush and Obama is $823 billion.

"Democratic Tax Cuts - Keynesian Theory

The theory favored by the Democrats is the Keynesian theory put forward by the British economist John Maynard Keynes in the 1930s and 1940s. Keynes' theory sought to manage an economy so as to keep it on an even keel and avoiding fluctuations in the business cycle - both the booms with their rising prices and busts (recessions / depressions) with their unemployment.

Keynes' prescription for downturns in the economy was to stimulate demand by increasing government spending and/or cutting taxes. The idea was to get money into the hands of consumers so that they would begin buying, which would cause business inventories to decline and this, in turn, would cause businesses to replenish the inventories by re-hiring laid off workers and putting idle factories and machinery back into production. As workers were re-hired, they would begin spending their new paychecks which would further stimulate demand and so on until the economy was back to full employment and full production. Of course, at this point, the government would have to pull back by reducing spending and/or increasing taxes, least demand outpace production and lead to serious inflation.

Since the objective of Keynesian tax cuts during a recession was to put money into the economy and encourage people to spend money, deficits were encouraged. To provide the stimulation needed to get the economy going, Keynes insisted that the government increase, or at leas maintain, current spending levels. Offsetting tax cuts with corresponding cuts in government spending, would, according to Keynes' theory, be self defeating in that the object was to encourage spending by consumers. Further, to be effective, Keynesian tax cuts had to be directed toward the lower income brackets since these brackets contained the people with the lower incomes. The lower a household's income, the more of that income the household has to spend to survive.

http://hubpages.com/hub/Democrat_vs_Republican_Tax_Cuts_

[Teatownclown]

You'd prefer %12 unemployment as opposed to the current %9? The QE2 program, TARP, Cash for Clunkers, and the stimulus all worked. Get over it.

btw, my check to Michele Bachman went out this morning.

[Conan71]

You'd prefer %12 unemployment as opposed to the current %9? The QE2 program, TARP, Cash for Clunkers, and the stimulus all worked. Get over it.

btw, my check to Michele Bachman went out this morning.

No, I'd prefer 6% as opposed to the sustained 9%.  Those were all temporary measures which, I agree, helped things from getting worse, but what are they currently doing for unemployment and growth in GDP?

[Teatownclown]

No, I'd prefer 6% as opposed to the sustained 9%.  Those were all temporary measures which, I agree, helped things from getting worse, but what are they currently doing for unemployment and growth in GDP?

It might have gone to %30 if it was computed realistically thank you GOP.

[nathanm]

No, I'd prefer 6% as opposed to the sustained 9%.  Those were all temporary measures which, I agree, helped things from getting worse, but what are they currently doing for unemployment and growth in GDP?

If things had gotten worse, we'd be at a sustained 10 or 12% unemployment rate. I agree it didn't work as well as it could have, but I was saying it wouldn't before the stimulus even passed, thanks to half of it being tax cuts and people's present propensity for paying off debt and saving money. When people and business won't spend for their own good, it's up to Government to create the demand necessary to prevent the fall being even larger.

The more we lose now, the worse off we are later.

[Conan71]

If things had gotten worse, we'd be at a sustained 10 or 12% unemployment rate. I agree it didn't work as well as it could have, but I was saying it wouldn't before the stimulus even passed, thanks to half of it being tax cuts and people's present propensity for paying off debt and saving money. When people and business won't spend for their own good, it's up to Government to create the demand necessary to prevent the fall being even larger.

The more we lose now, the worse off we are later.

What constitutes spending for one's own good?  Are you saying it would have been good for the overall economy for them to spend instead of saving or getting out of debt?  Keep in mind many of us have parents born in the depression which means we had grandparents who lived through and had to wade their way through the depression.  My grandparents got really thrifty, saved what they could in the event my grandfathers would have found themselves without work, and didn't borrow money.  Many of us had that lesson handed down.

Personal survival will always trump the survival of the herd when it comes to humans.

Oh, and I disagree about the government creating demand with this stimulus.  They simply funded a lot of projects which states and cities didn't have the funds to do and extended U/E benefits.

Maybe it's just semantics between your assertion of "demand" and people spending for their own good.  Oh, and I was at least hoping you'd acknowledge I pwn3d you on Keynes and tax cuts.  

[guido911]

You'd prefer %12 unemployment as opposed to the current %9? The QE2 program, TARP, Cash for Clunkers, and the stimulus all worked.

It worked? Really? Because I thought Obama's team said if we passed stimulus, unemployment would not exceed 8%. Instead, we got 10%. Here's Greenspan's take:

The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.

In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing over the past two years had done little to loosen credit and boost the economy.

"There is no evidence that huge inflow of money into the system basically worked," Greenspan said in a live interview.

"It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion," he said. "Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1."

http://nation.foxnews.com/alan-greenspan/2011/06/30/greenspan-stimulus-failed#ixzz1QookmD8V

Now, I am NO fan of this "let's raise taxes" guy, but I am likely to take his opinion over yours clown.

[nathanm]

Greenspan was talking about QE and QE2, which have nothing to do with the stimulus. One is the Federal Reserve, the other is the Federal Government. Congress and the President get no say over monetary policy. Bernanke gets no say over fiscal policy.

QE did thaw out the credit markets and QE2 did manage to push commodity prices up, but I don't know that they had much effect otherwise. Banks are using most of the QE money for their own purposes rather than lending it out. Yet another example of how allowing commercial banks to have prop trading desks isn't a particularly great thing.

[guido911]

Greenspan was talking about QE and QE2, which have nothing to do with the stimulus. One is the Federal Reserve, the other is the Federal Government. Congress and the President get no say over monetary policy. Bernanke gets no say over fiscal policy.

QE did thaw out the credit markets and QE2 did manage to push commodity prices up, but I don't know that they had much effect otherwise. Banks are using most of the QE money for their own purposes rather than lending it out. Yet another example of how allowing commercial banks to have prop trading desks isn't a particularly great thing.

Did you bother reading the damned post I was responding to? NO. As for Greenspan on stimulus, chew on this.

The former head of the Federal Reserve said fiscal stimulus efforts have fallen far short of expectations, and the government now needs to get out of the way and allow businesses and markets to power the recovery.

"We have to find a way to simmer down the extent of activism that is going on" with government stimulus spending "and allow the economy to heal" itself, former Fed Chairman Alan Greenspan told a gathering held at the Council on Foreign Relations in New York on Wednesday.

At this point, "we'd probably be better off doing less than more" because "you'd be far better off to allow the normal market forces to operate here," Greenspan said. That's largely because stimulus spending is not proving as effective as many had hoped. "To the extent the evidence suggests very large deficits concurrently crowd out capital investment, there is a debit to the stimulus program that is somewhere between a third and a half of what the gross stimulus is," he said.

[Emphasis added]. http://blogs.wsj.com/economics/2010/09/15/greenspan-fiscal-stimulus-worked-far-less-than-expected/?mod=rss_WSJBlog&mod=marketbeat

And in March 2011:

But with Republicans in control of the House, Greenspan's views are starting to gain an audience again. Many Republicans share his opinion that intervention has created uncertainty and deterred private sector investing.

Greenspan targeted deficits created by the $787 billion 2009 Recovery Act as the main culprit behind the current sputtering recovery.

Why are deficits to blame?

Greenspan said the Treasury Department's borrowing "crowds out" companies from finding similarly low interest rates to borrow funds for capital investments on equipment and plants.

[Emphasis added]. http://money.cnn.com/2011/03/15/news/economy/alan_greenspan_recovery/index.htm

Please interpret for us what Greenspan meant in the two above articles? Because to me, it seems stimulus, QE, and QE2, all failed in his eyes.

[nathanm]

lol, you actually listen to the guy whose policies caused the housing bubble?

[guido911]

lol, you actually listen to the guy whose policies caused the housing bubble?

And here we go again. Change the subject or

[Townsend]

And here we go again. Change the subject or

Ladies and gentlemen, the expert on this subject.  Please hold your applause.